Hedge Ratio Calculator
Calculate the exact hedge ratio to protect your portfolio. Determine how many shares, puts, or calls needed to achieve delta neutral positions or partial hedges.
What is Hedge Ratio Calculator?
Hedge Ratio Calculator is a tool that calculates how many shares or option contracts are needed to offset the directional risk (delta) of an existing position, creating a neutral or hedged portfolio.
Hedge ratios are essential for market makers and professional traders managing portfolio risk. Adjusting hedges as delta changes (gamma scalping) can generate profits from volatility.
How the Hedge Ratio Calculator Works
A hedge ratio is the number of option contracts (or shares) needed to offset the delta of an existing position: Hedge Ratio = Position Delta / Option Delta per Contract. The result tells you how many contracts of the hedging option to buy or sell to bring your net delta to zero, or to whatever partial-hedge target you choose.
Example: you own 500 shares, for a position delta of +500. At-the-money puts have a delta of −0.50, or −50 per contract. Hedge Ratio = 500 / 50 = 10 puts for a full delta-neutral hedge. For a 50% partial hedge, buy 5 puts instead.
Because option delta changes with the stock price (gamma) and with time (charm), a hedge ratio calculated today will drift — active hedgers recompute and rebalance the ratio as conditions change, a practice known as gamma scalping when done repeatedly for profit.
Frequently Asked Questions
What is a hedge ratio in options?
A hedge ratio is the number of option contracts or shares needed to offset the delta risk of a position. For example, if you own 100 shares (delta +100) and want to be delta neutral, you need options with a combined delta of −100 — 2 ATM puts at −50 delta each, or 1 deep ITM put at −100 delta. The hedge ratio changes as the underlying price moves, because option delta itself changes (gamma).
How do you calculate hedge ratio?
Hedge ratio = Position Delta / Option Delta per Contract. Example: you own 500 shares (position delta +500). ATM puts have a delta of −0.50, or −50 per contract. Hedge ratio = 500 / 50 = 10 puts for a full hedge. For a 50% partial hedge, use 5 puts. The calculator computes the exact hedge size for any position based on live Greeks.
Related Options Strategies
Options Greeks Guide
Understand delta before calculating hedge ratios.
Protective Put Strategy
Simple 1:1 hedge ratio for portfolio protection.
Covered Call Strategy
Partial hedge using short calls.
Understanding related strategies helps you choose the best approach for your market outlook and risk tolerance. Each strategy has unique characteristics that make it suitable for different market conditions.